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Near-month natural gas futures backtracked 7.3 cents Wednesday to $7.667, but the wimpy finish revealed little about the rodeo ride that took place during the trading day. The contract bounced all over the charts, dipping to a low of $7.50 after the opening bell, suddenly jumping up to a high of $7.960 about two hours later and then collapsing back below $7.60.

"The market showed us quite a bit of indecision after [Tuesday's] major run higher," noted a Washington, D.C.-based broker. "We managed to make a new high, but didn't hold it and slipped off a bit.

"I think the fact that we didn't carve out more of the gains from [Tuesday] still leaves the bulls in control here, but there is some concern about the February forecast following next week," he noted. "Obviously tomorrow will be an important day to see if support holds."

Citigroup futures analyst Tim Evans agreed that there is uncertainty in the market about the weather outlook. A key factor is that the coldest weather is about to move out of the six- to 10-day forecast and into the one- to five-day forecast. "It's going to make the six to 10-day forecast look warmer. If you happen to be focusing on that time frame, it will make the outlook look weaker when it really has not changed all that much."

In the meantime, the coldest temperatures yet this season are about to arrive for much of the country. Physical gas demand is likely to be even higher next week. Storage withdrawals should continue to grow.

Evans said Frontier Weather calculated that heating degree days (HDD) for the Energy Information Administration (EIA) storage week last week totaled 209, which was slightly higher than the 197 HDDs during the prior week when the EIA reported a 179 Bcf withdrawal. Frontier Weather expects 215 HDDs this week and 238 HDDs for the week ending Feb. 9.

"Right now the week ending Feb. 9 is expected to be the coldest for the season. You have to look for storage withdrawals to be walking higher from that 179 Bcf we had last week [for the week ending Jan. 19]," said Evans.

"It wouldn't surprise me if there is an echo of last week's sell-off tomorrow," said Evans. "Last week, we had a larger-than-expected storage withdrawal and we sold off about 25 cents. Let's say the number ends up being a little higher than expected but not dramatically so. We may see a 15-cent drop in the next 10 minutes and then it turns 30 cents higher. You thought it was going to be like last week, but guess what? It's not. This natural gas market is just an ornery rambunctious beast. I understand what rodeo bull riders go through."

Both Evans and the Washington, D.C. broker expect to see another price push to the upside. But there's uncertainty in the market about what will happen toward the second half of February when storage withdrawals begin to decline.

"I still think this has a desire to move higher," the broker added. "We're racking up some good degree days this week and should get even more next week, so that will give us several weeks of high storage numbers. The key will be if temperatures can stay below average through the end of February." He predicted that if extended forecasts start to show a significant warm-up, "we're probably looking to go back down and try to hold at $7. If we do get back to warmer-than-normal temperatures in late February, we would probably break down into the $6.50 area again."

With 2,757 Bcf of working gas in storage as of Jan. 19, a total of 1,508 Bcf needs to be withdrawn from storage over the next 10 weeks for working gas levels to break even with last year's record high season-ending level of 1,249 Bcf on April 1. That's an average weekly withdrawal requirement of 150.8 Bcf.

The average weekly storage decline over the same period over the last five years was 105.3 Bcf. Last year, the decline over the same period averaged only 79.9 Bcf/week.

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